Three Federal Reserve policymakers said the U.S. government should try new ways to spur the housing market without agreeing about how much more the central bank needs to do to bring down interest rates. New York Fed President William Dudley said in New Jersey on Friday that “additional housing policy interventions” can help boost growth, even as the Fed should consider further easing. Boston Fed President Eric Rosengren, speaking in Connecticut, took the more-aggressive position of supporting the purchase of mortgage-backed securities, while Fed Governor Elizabeth Duke said in Virginia that the central bank’s current monetary stance is “appropriate.”
The comments underscore concerns by Fed officials that they may be reaching the limits of their power to boost growth and lower unemployment through three years of near-zero interest rates and unconventional policy tools. Chairman Ben Bernanke this week urged lawmakers to do more to revive the housing market, calling it an impediment to the economic recovery. He delivered a 26-page staff report to Congress outlining possible solutions.
“Bernanke realizes that we need to boost housing and if housing does not recover, what the Fed does will be for naught,” said Sung Won Sohn, former chief economist at Wells Fargo & Co. who is now a professor at California State University Channel Islands in Camarillo.
The chairman and his colleagues “are trying to jawbone” the Obama administration, Congress, Fannie Mae and Freddie Mac to support the housing recovery, Sohn said.
The central bank’s policy-setting Federal Open Market Committee meets Jan. 24 to 25 in Washington, where governors and regional-bank presidents will for the first time present projections for the benchmark federal funds rate. The Fed signaled this week in minutes of December’s session that it may alter language saying rates will probably stay near zero until at least mid-2013.
The central bank cut its main interest rate almost to zero in December 2008. Bernanke has said the Fed is considering additional actions, including a third round of large-scale asset purchases.
